Is it ok to put 100% of your portfolio into Gics | General financial discussion | Discussion forum

You need some accessible money for emergency costs, but yeah, the rest is all in GICs for me. I like 20k in HISA and laddered GICs so every month has a matured GIC. I do like index stocks, but I’m currently out of the market.

With no other assets or real estate, I’d say no, the returns aren’t enough.

There is risk to everything, including GICs. It's a matter of degree and how you understand the political and economic factors at play.

There are basically two risks with GICs as I see it, and they are interconnected.

The first is that the financial institution could fail. If you stay within insured limits, you are better protected, but not completely. It depends ultimately on the ability of the insurer to withstand larger disasters.

The second is currency risk. All your money is invested in Canadian dollars (or maybe some USD GICs as well, but you wouldn't like that because of lower rates). Were we to experience some kind of economic or natural disaster and runaway inflation, you would wish you had diversified further.
Remember that Canada is a small player internationally, and that our economy is focused primarily in certain sectors such as financials and natural resources. The US economy, by comparison, is much more diversified.
In this context, consider how much of your budget is spent in other currencies, either by online shopping, travel, or imported items.

Vatox said
You need some accessible money for emergency costs, but yeah, the rest is all in GICs for me. I like 20k in HISA and laddered GICs so every month has a matured GIC. I do like index stocks, but I’m currently out of the market.

With no other assets or real estate, I’d say no, the returns aren’t enough.  

Ditto

2of3aintbad said
I think it is not prudent to put 100% of your portfolio in anything.  

+1

"Diversification is the only free lunch in finance"
Harry Markowitz

In Globe & Mail GenYmoney: Can I put 90% of my investments into equities?, PWL Capital associate portfolio manager Benjamin Felix approaches the asset allocation question from the other direction.

picassocat said
My investment strategy is the following : there are 11 traditional sectors in the economy (basic materials, communication services, consumer cyclical, consumer defensive, energy, financial services, healthcare, industrials, real estate, technology & utilities), so I went on to invest in at least one etf/mutual fund per sector (where the greater part of the holdings are in the given sector) and more than one etf/mutual fund in sectors of importance (financial & technology for example) being careful to choose funds that cover Canadian, US and international holdings. I ended up with 27 funds, I’m happy, well diversified, and all my bases (I think) are covered. I will review my portfolio once a year.  

27 Funds seems excessive to me - but without knowing % and $ value of your portfolio in each of Canada/US/International and % and $ value in each sector it is hard to conclude on how diversified you really are. Also, it would appear that dividend income may not be a criterion in this portfolio strategy - only "diversification".

Is it ok to put 100% of your portfolio into GICs ?

If you are 80 years old, a 100% definitely ok
If you are 20 years old, a 100% definitely worst decision you will ever made
If you are somewhere in between, it should be allocated somewhere in between.

I agree, 27 funds is crazy to me, but picassocat says she/he is "happy", and that's the goal, after all, who cares what everybody else is doing? There's no one-size-fits-all, people have different risk tolerances, willingness to pay fees, willingness to spend time on their money matters, willingness to depend on social supports provided by others, etc, etc, so to me a key is to fit your plan to what you know you'll be able to stick with happily, what suits you. Because to me the discipline to stick to your plan is where most people err, especially if we're talking over decades. Though I must admit that with interest rates so low for a long time (10 years? 20 years?) I don't see how interest bearing securities are going to get it done for young folks, and I've heard some express they feel they have no option but to be mostly or fully in the markets.

Having said that about sticking to the plan, I withdrew from the markets pretty well totally about 3 years ago, was at the age where decades of investing had worked out and I needed no more (plus my view is that capitalism is being jettisoned in the first world, with the pace quickening, so I believe the future will not resemble in any way the past for investors), but then the virus came along and I couldn't resist going back in when the market tanked in first part of 2020, to me was clearly a classic buying opportunity, and I don't think I've ever made as much in the markets in an 18-month or so timeframe as this. Now I just have to figure out when best to exit again. So I guess the lesson is have a plan that you know you can stick to, but also don't be totally blind if things happen in the world that clearly present short-term changes/opportunities.

It is okay if you are comfortable with being assured the relative value of your cash (GIC) assets depreciating over the medium to longer term such that the relative of value of n when you started is less than the relative value of n when you are finished.

n = value of GIC assets
relative value = the value of the GIC assets relative to what can be purchased, expended, invested, or otherwise at the time of purchase and redemption

Cheers,
Doug

canadian.100 said

Also, it would appear that dividend income may not be a criterion in this portfolio strategy - only "diversification".  

Many of my funds have distributions, but I invested specifically in two of them for that particular reason (txf.to & gdv.to). All my funds are weighted.

Loonie said

I would never want to have to choose or manage 27 market investments, but it could be a very educational exercise.

Easy to manage, «let it ride» and review in one year. Yes, it was very educational just choosing funds by sector and by region. I also included two distribution funds (see above) + one European fund (zxm.to) and one fund from Asia (zid.to). I have next to nothing invested in China.